As the economy continues to remain in bad shape, people are increasingly looking online for ways to supplement or replace lost incomes. For many, working from home on the Internet is an appealing idea.
The tough part, especially for those who have never run any kind of business before, is getting started—and doing so properly. In this article, I’ll give you a general overview of the steps you need to take to start your own business online.
Starting Out on the Right Foot: Business Licensing
The first thing to sort out is business licensing. Many people overlook this when starting a business online—thinking that “it’s just a website.” But, a business is a business, whether you have a store front or a website. Be aware, too, that if you plan to sell physical products, you’ll most likely need to have a business license number to place orders with wholesalers and manufacturers.
Business licensing is something that varies from country to country and, within the United States at least, also varies from state to state, city to city or county to county. As a result, you really need to speak to a local accountant, county auditor, other business professional or government representation to learn the licensing requirements specific to your area. Your local chamber of commerce can also be a good starting point for information.
Another thing you’ll need to discuss with your accountant or tax professional is how you’ll need to report your online earnings on your tax filings. This is definitely something you don’t want to overlook!
Picking a Business Type
The type of business entity (sole proprietorship, limited liability corporation (LLC), S-corp, corporation) you set up is something best discussed with your accountant, attorney or other professional and is not what I mean to talk about here.
Instead, I mean the specific type of online business you want to run. Are you looking for something portable, something flexible enough that you could run it from anywhere in the world where you have Internet access? Or, are you looking to be more hands-on in the business?
If you want to get deeply involved with your business, if you want to be able to inspect the merchandise you are selling before you ship it out to your customers, you will want to be a direct seller. In this case, you’ll keep an inventory of the products you sell, so that you can inspect them yourself and carefully pack them before they get on their way to your customers.
On the other hand, if you want a less “hands-on” approach, you may choose to work with dropshippers or affiliate programs. Neither of these will require you to maintain your own inventory.
Another option is marketing digital products, like eBooks, that can be delivered completely online. With digital products, the inventory is virtual and doesn’t require turning your garage or basement into a warehouse.
You can also do a combination of these methods. You might stock popular products while selling less popular products through a dropshipper or as an affiliate. By stocking popular products—those that you know will sell—you will more than likely get better per unit pricing than you do using a dropshipper, thus increasing your profits.
Choosing a Niche
Choosing a niche is often a sticking point for some people. Do you follow your passion or do you go for the profit? If you ask for advice, you’ll likely get both answers!
The sad truth is that not all passions are profitable so, depending on your interests, you might end up having to look for a niche with greater profitability. However, it would still be best if you can find something with which you have an interest. Since this is something you will need to consistently work at, you don’t want to choose a nche that you’ll be completely bored with in a couple weeks. Building an online business takes time and effort—you need to pick something you’ll be able to stick with for at least 3 to 6 months, just to get it going.
Of course, you’ll still need to be willing to stay with it for a longer term as well! Prepare yourself for the long haul by choosing a niche that will hold your interest.
Giving Them What They Want: Finding (or Creating) Products
Once you have chosen the niche for your online business, you’ll need to find products you can sell—or create them!
If you will be running your business as an affiliate, you’ll need to look for merchants with affiliate programs. There are two principal ways to do this. The first is to visit the merchant’s website and see if they have any information on an affiliate program. If not, you can always send them an eMail to ask them. They might have an affiliate program but not advertise it on their home page. The other way to find affiliate programs is to join an affiliate network. You can then browse through their listings to find merchants and products to promote. Some may require that you already have a website—and perhaps additional requirements—before they will approve you for their affiliate program. So, be sure to satisfy the requirements before applying.
If you will run your online business as a reseller, you will need to find products you can purchase wholesale or find a dropshipper. Bear in mind the different levels of wholesalers that are out there. Some manufacturers will sell their merchandise directly to resellers at wholesale prices. Others will sell through distributors, who then sell the good to resellers. Other manufacturers will sell to distributors or resellers who meet minimum purchase requirements; some of these may even sell to individuals who meet order minimums.
Purchase requirements may be based on a dollar value or a quantity of units; sometimes both. Both manufacturers and distributors may have their own minimum purchase requirements to qualify for discounted pricing.
You’ll want to keep minimum purchases in mind when selecting products. If a minimum is too much for you to afford or risk when starting out, you might want to use a dropshipper until you’ve built up your sales volume.
Also, keep reordering minimums in mind. A slow-moving product may sell out, but you might not be able to get more in stock until you can meet whatever order minimums there may be.
Experience will be of great value in these cases, which makes using a dropshipper another worthwhile option when starting out. You might want to use dropshippers first and not stock your own inventory until you have a better idea of what sells quickly, what sells slowly and what just won’t sell at all. (Remember, you can always use eBay to unload your slow-moving products, if you stock any, and that might help you at least recoup your costs on those items.)
To find these products, you’ll use a similar method to finding affiliate programs. You can check the search engines to look for manufacturers’ websites. But, even in this day and age, there are manufacturers that may not have websites (or good ones) so they may be hard to find. You will also need to be careful of sellers that advertise “wholesale” pricing, but are just deep discounters rather than real wholesalers or distributors.
You can also try contacting manufacturers directly to inquire about wholesale orders. Even if they won’t sell direct to you, they will probably tell you who their distributors are.
The third option to finding wholesale or dropship companies is to join or subscribe to a wholesale directory. Granted, some people don’t like to pay for information that is “free,” but such directories may be able to save you a lot of time in tracking down all the “free” information yourself. Just be sure to research a directory before joining, so that you can make sure you’re getting a good deal. If you cannot afford a membership to a wholesale directory, just do the work yourself. It may take you more time but, if you have more time than money to spend, it may be your only option.
If you plan to create your own products, a lot will depend on whether you will be creating digital or physical goods. For digital products, all you may need is a graphics program, Microsoft Word and an option to save your file as a PDF, and you’re good to go for an eBook. If you are creating software programs, you’re probably already all set with your application development framework. In the case of physical products, you’ll need to determine how to create them. Will they all be done by hand? Will you outsource the manufacturing of your product? In either of these cases, you’ll need to find manufacturers that provide such services, using the same methods as you would to find a manufacturer of a brand name product. Alternatively, you may purchase the equipment to produce your product yourself. It will all depend upon your product, the costs of supplies and equipment, your capabilities, quantities and many other factors.
Opening the Doors on Your Virtual Storefront
Building your website is another step in the process of building your online business. Here, too, you have a lot of options.
You can build a site through a third-party that offers proprietary site-building software and hosting all-in-one. Many online “stores” do just that. Another option is using third-party software solutions—which may be commercial, free or open source—with a good web hosting provider. Some of these solutions, such as WordPress or Joomla!, even have a variety of templates available to get you started. Others will require more customization. If you’re know PHP or another web coding language, you may be able to create your own custom solution.
The route you go will largely depend on the type of site you plan to have. If you are an affiliate, you probably won’t need a shopping cart or virtual store or anything like that. If you are selling a product yourself, you will need a fuller eCommerce solution.
As an affiliate, your larger concern will be creating a quality, content-rich website, so, rather than a shopping cart, you will be looking for a content management system (CMS) to make managing your site easier.
Accepting Payments on Your Website
Once you have a product and a website, you’ll need a way to accept payments. As an affiliate, you don’t need to concern yourself with this, as the merchant’s site will process payments. On the other hand, if you are selling products yourself, you’ll need a way to accept payments.
The old-fashioned way is to just ask customers to mail a check or money order. While that is certainly a good option to have, if that is your only method of payment, you will lose a lot of business, especially if you are selling digital goods!
You will need to be able to accept credit cards. However, doing that online can be difficult and expensive. Fortunately, prebuilt shopping cart and payment solution scripts are available—all you need is your own merchant account and a payment processor. Just make sure that whichever prebuilt solution you by is compliant with the latest PCI Data Security Standards.
Once you have a script that meets PCI DSS requirements, you’ll need a merchant account and payment processor. Many services will handle both of these for you. But, always be sure to research providers carefully and look for the best rates. Some services may have resellers too, and these resellers may be more familiar with specific shopping carts and payment scripts, so they may be able to provide you better assistance in getting your site up and running to accept credit card payments.
What is important to know is that there are large penalties and fines if you get caught processing credit cards using methods that fail to meet PCI DSS requirements. These can range into thousands of dollars and also cost you your merchant account.
If you don’t want to have to worry about that, especially when starting out, you can use a third-party payment processing service, like PayPal.
Whether you decide to accept credit card payments directly or use a service like PayPal, keep in mind that it may be a good idea to offer a variety of ways for people to pay. Giving a potential customer fewer excuses to not order by providing them with the choice of payment methods (so they can choose a way they are comfortable with) can help increase your sales.
Conclusion
This covers the bare basics of getting your own eCommerce site up and running. It may seem complicated, but it’s really not! Tackle things one step at a time. If you find you can’t do something yourself, you can probably find someone to help you. Don’t let fear hold you back from trying something new. The important thing is taking that first step—don’t put it off for another day!
Once you’ve got your site up and running, you’re going to need to get the word out about it. For a product that covers the fundamentals of Internet marketing, take a look at the Internet Marketing Backstage Pass, a beginner’s guide to getting started in Internet marketing.
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